Startup Companies’ Role in Industry’s Future

Stephen Whitfield, Oil and Gas Facilities Staff Writer | 25 June 2016

Innovative technologies will be critical to the industry as it manages through an oil price downturn, and the industry must create a supportive environment for startup companies that promotes the growth and competition needed for a stable marketplace, a group of experts said.

At a panel discussion, “Energy Outlook and Future of Innovations for Deepwater in a Cost Competitive Environment,” held at the 2016 Offshore Technology Conference, representatives from operators, service providers, and academia discussed the hurdles startup companies face in establishing a presence in deepwater operations. Among other topics, the panel spoke about the high costs of entry in developing and testing new technologies.

Ram Shenoy, a principal at Innovations Impact and former chief technology officer at ConocoPhillips, said deepwater and offshore operations present the biggest financial risk for new companies. He said startups have seen a confluence of talent in the midst of the oil price downturn and subsequent downsizing of the labor force. With more companies seeking a limited amount of venture capital, the space for development has become more crowded, thus increasing the need for more innovative technological solutions that may attract investment from operators.

“I don’t see startups necessarily tackling the high financial capital project type activities,” Shenoy said. “What I do see is people trying to break off activities that traditionally might be pursued by either operators or large integrated service companies, and trying to make value propositions of smaller, more manageable chance.”

Robotics and automation were specific areas that Shenoy said could see a boost in innovative technologies, particularly the use of drones to inspect platforms. He said operators have had trouble deploying their own solutions, and that he could see startups carving a niche in the space.

“This is just a general theme, if you can remove people and costs from the wellsites,” Shenoy said. “Why spend money putting up scaffolding to have humans inspect platforms when you can take drones to go up and access relatively inaccessible parts of the platform during inspection?”

Derek Mathieson, chief commercial officer at Baker Hughes, said that the number of startups entering deepwater and offshore is not problematic for operators. However, he acknowledged that the influx of venture capital has crowded the field. He said small companies must find avenues that allow them to quickly deliver their products to market, but the money needed to test new products provides a tough obstacle.

“The way we look at some of the hurdles to entry in some of the spaces makes it very difficult for smaller companies to get their motor running,” Mathieson said. “I honestly think we had more room before venture capitalists and startups entered the space in general. I think there are some real challenges in the deepwater space to allow them to be viable companies in their own right.”

Kripa Varanasi, a deputy associate professor of mechanical engineering at the Massachusetts Institute of Technology, said the collaboration between industry and academia is not enough to develop an ecosystem that helps startup development. He suggested that companies develop their own strategic venture capital funds to expedite the initial investments in startups.

“We have this great technology, and we know we can do a hundred different things with it, but where do we focus? Where do we focus so that we can quickly know if this is not going to work or this is going to work, so the company can then make money? I think that’s going to be an important space,” Varanasi said.

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